L Brands Attains 52-Week High, Initiatives Pays Off
Specialty retailer of women’s intimate and other apparel, beauty and personal care products, L Brands, Inc. (LB) hit a 52-week high of $70.80, on Oct 21, before closing a notch lower at $70.35, reflecting a year-to-date return of nearly 18.4%.
L Brands’ sustained focus on cost containment, inventory management, merchandise and speed-to-market initiatives have helped it to stay afloat in a sluggish consumer environment. Moreover, the company’s foray into international markets is likely to bring long-term growth opportunities as overseas stores continue to perform better and generate increased sales volumes.
Further, L Brands commands a market leading position in the lingerie, personal care and beauty segments. The company’s innovative merchandise and exclusive assortments have not only made it a popular name among consumers but also set it apart from its peers. Moreover, its operational efficiencies position it well to capitalize on the same, as evident from the company’s sales performance so far in the year.
From April to September, L Brands has consistently registered comparable-store sales growth. Within this period, comps growth touched a low of 2% and hit a high of 8%, thereby recording average growth of approximately 5%. Comparable-store sales increased 8% in April, 3% in May, 2% in June, 6% in July, 5% in August and 6% in September.
Moreover, the company has an impressive history of positive earnings surprise. In the trailing 13 quarters it has surpassed the Zacks Consensus Estimate by an average of 3.7%, including 1.6% for the last concluded quarter.
The company posted second-quarter fiscal 2014 earnings of 63 cents a share that came a penny ahead of the Zacks Consensus Estimate and rose 3.3% from the prior-year quarter earnings of 61 cents on the back of higher sales. This prompted management to raise its full-year earnings projection.
Management now forecasts earnings between $3.03 and $3.18 per share for fiscal 2014, up from $3.00 to $3.15 projected earlier. The current Zacks Consensus Estimate for fiscal 2014 is $3.23, which signifies L Brands’ earnings will surpass its own guidance range.
L Brands continues to revamp its business by improving store experience, localizing assortments and enhancing its direct business. We believe these measures will help it to generate incremental sales and increase store transactions through a higher conversion rate. However, a competitive retail landscape and aggressive promotional strategy to gain market share may weigh on margins.
L Brands currently carries a Zacks Rank #2 (Buy). Apart from L Brands, Nordstrom Inc. (JWN), Nike Inc. (NKE) and The Clorox Corp. (CLX) have also hit new 52-week highs of $71.75, $90.70 and $99.60, respectively.
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